Monitoring the Trust Fund: What to Watch for and How to Determine Whether Litigation Is Needed
As a trust beneficiary, do you ever feel like you’re helplessly at the mercy of an incompetent, biased or corrupt trustee? Depending on the type of trust, you may actually be able to compel the trustee treat you more fairly… or risk court consequences. Trusts can be apathetically unmanaged or actively mismanaged, so work to understand and implement the following tactics for monitoring your trust funds.
How to Assess What’s Happening in Your Trust
Ask the trustee the following questions:
- When was the last time someone reviewed the trust?
- Do you have a trust management plan in place? If so, what is it?
- Do you know how to implement an investment approach that best serves the interests of your beneficiaries?
- Have you recorded your decisions as evidence in the event that something happens and you need to justify your actions?
- May we set a time to discuss the trust on a regular basis?
- How are you handling the special needs of the beneficiaries?
Ideally, the trustee will know the answers to all of these questions, but don’t be surprised if he or she responds with a blank stare.
When Trust Litigation is Needed
Although trusts themselves are fairly straightforward, disagreements between trustees and beneficiaries can make the process difficult, especially if valuable assets are at stake. Beneficiaries under the terms of the trust rely on the honesty and competence of others to enjoy their rights.
When a trustee fails to uphold his or her legal responsibilities, the beneficiaries are entitled to claim a breach of fiduciary duty and bring the case to probate court. Pursuing litigation may help you recover losses due to dishonesty, neglect or errors in the representation of the trust’s terms.
So, how do you know when trust litigation might be an appropriate remedy?
Disputes leading to litigation typically occur after the trustee:
- Fails to distribute the assets according to appropriate instructions
- Mismanages the assets
- Fails to report to the beneficiaries properly
- Misinterprets his or her duties as required by law
Not all trustees have what it takes to fulfill their fiduciary responsibilities. If you’re the beneficiary of a trust, actively monitor your trustee, and take action whenever necessary in order to protect your interests.